OPM 311 1st Edition Exam #1 Study GuideOperations management= management of systems that produce goods or provide services- 2 main sides to business:1. Demand  sales and Marketinga. Responsible for forecasts, impacting customer behaviors, getting orders2. Supply (Fulfillment) Operations and Supply Chain Managementa. Responsible for making and delivering products/servicesb. Accounting “keeps score” for firm through profit and cost analysis- The Transformation Process: converting raw materials into products/serviceso Happens within the Supply Chaino Creates wealtho Gathers feedback and compares it to previously established standards- Demand Planning Process “belongs” to top management of Sales and/or marketing (usually VP)- Operations or Production PlanningProcess “belongs” to top management of Operations (usually VP or COO= Chief Operations Officer)- Operations and Supply Chain Management (OSCM) Careers:understanding logistics, efficiency, qualityo Operations managero Supply chain managero Production analyst o Schedule coordinatoro Master schedulero Quality managero Production managero Purchasing managero Buyer- APICS= Operations and Supply Chain Management premier professional group- 80% of $ a firm makes comes from ~20% of the items the firm offerso Plan accordingly- Fundamentals of Firms:o Mission “what are we in business for?” “what is important to us?”o Corporate Strategy long term, objectives of growth in the futureo Business Imperatives top priority goals, must be done in the next 12 months- Strategy Formulation:o Core Competency skills that define the business, won’t be subcontracted out because firm does it besto Environmental scanning look at internal and external factors affecting strategy Ex: SWOT= Strengths, Weaknesses, Opportunities, Threatso Take into account: Oder qualifiers “given” standards that allow you to compete in market- Ex: Quality is now an order qualifier Order winnersstandards that make a firm perceived as better than competition - Demand Variation usually predictable, expectedo Ability to adjust to change leads to competitive advantage o Must offset variation with: Buffer inventory Buffer capacity Capacity flexibility- Metrics of Operational Performance (most important):1. Customer Service 2. Cost- Setup of a good management system:1. Good process design Deteriorates over time without process accountability 2. Accountability to the process 3. Metrics/ Results Can be daily (schedule review), weekly (performance review), monthly (S&OP)- S&OP= monthly accountability infrastructure risk management process to plan horizon of demand and fulfillmentso “Handshake”o 12-months rolling - Trade-offs:o Customer Service vs. Costgood customer service costs company more $$$o Inventory buffer vs. cashhaving backup inventory can be costlyo Capacity cushion vs. costhaving capacity to produce more but not actually producing more is costlyo Leap frogging capacity needs large increments vs. small incremental growth strategy companies like to grow in small increments but some strategies require large growth spurts- Time-Based Strategies- Agile Operations gaining the competitive advantage by being able to adjust/beflexible to environmental changeso Agility and Flexibility are crucial to competitive advantage todayo Companies are asking suppliers for shorter lead timeso Customers want broader scope of product configurations- The Balanced scorecard 4 main elements- help with strategic planning:1. Customer2. Financial3. Internal business processes4. Learning and growth- Productivity= Output/InputsPartial Measures OutputSingle Input; OuputLabor; OutputCapitalMultifactor Measures OutputMultiple Inputs; OuputLabor +Machine; OutputLabor +Capital +Energy- Efficiency of Operations= Actual Output Effective Capacityo =Standard hours Hours paid- ERP (Enterprise Resource Planning) Process AND software that integrates all planning and executions systems within an organizationo Business Planning Demand Plan and Production Plano Demand Plan Production plan- Forecasting never perfect ***o Longer horizon less accurate forecast- Forecast detail logic forecasting totally $ sales is more accurate than forecasting individual SKUs- Sustainability= managing resource so that they are available in the futureo Wont harm the environment and support human existenceo Affects all areas of business- Demand Planreviewed at least monthly to ensure validity, performance is measured and posted at the endo Inputs:1. Businessplan (what products, market, customers, revenue, pricing, economic assumptions?)2. Marketing (affecting customer behaviors, promotions, new product introduction, channel management)3. Sales short term (understand opportunities, closure rate, closure cycle time)4. History (experience, statistical history, seasonality, predicting future based on past performances)o Outputs (ERP model):1.  Direct to Production Planning2. Links to MPS (Master Production Scheduling)- Time Series Analysis collect data at regular intervals and use past data to predict future patternso Most recent data is most accurate/helpfulo “Rolling”- when new data is collected, drop off oldest data- Moving Average update forecast as more data is addedo Fewer data points (less history) more responsiveo More data points (more history) less responsive - Simple Moving Average=- Ex: Forecast for July= Jan+Feb+March+April+May+June6- Weighted Moving Average= Ft=wt( At)+wt −1( At−1)+.. .+wt −n( At −n)o More recent data is given more weighto W (the weight measurement) is somewhat arbitrary trial and error Sum of all weights must =1o Ex: forecast for July= .10Jan+.10Feb+.10Mar+.20Apr+.20May+.30Jun- Exponential Smoothingweighted average including ALL past datao most recent data points are more heavily weighted (assumes it is most accureate)o most used technique-- How to choose alpha?o α= controls the speed of change biggerα faster trend predicted smallerα slower trend predictedo 0 < a < 1, usually between 0.1 - 0.3o Calculated: depends on random variationo Trial and Error best way to choose- which value best fits historical demand pattern- Seasonalitydemonstrates repeated surges or dips in demand year after yearo Can happen at any time during the yearo Seasonal factor is calculated into forecast - MAD (Mean